Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


NZ meat industry tie-up stumbled on differing strategies

NZ meat industry consolidation stumbled on differing strategies, uncommitted farmer suppliers

By Tina Morrison

Aug. 21 (BusinessDesk) - New Zealand meat companies abandoned efforts to consolidate and reduce surplus capacity last year because they lacked an agreed export strategy and farmers wouldn’t commit stock to firms that closed plants, industry sources say.

The country’s four biggest meat processors - farmer owned cooperatives Silver Fern Farms and Alliance Group, accounting for about half the industry, the Talley’s Group family-owned Affco and ANZCO Foods, with a majority ownership held by a Japanese food company - ended talks after failing to reach agreement last year.

A proposal for competitors to share the cost of closing plants was rejected, as was a plan for each company to retain its stock volumes for a period of up to five years following a closure, so they weren’t disadvantaged, according to people involved in the talks, who asked not to be named.

The fragmented industry ownership and lack of agreement about how to market New Zealand meat overseas hindered the meat companies from conforming to a model which locked in supply, especially amongst the 17 odd smaller exporters who would need to broadly agree to consolidation. Meat companies are using different strategies to market their product to the world, ranging from Silver Fern Farms’ branded cuts for the supermarket shelf, to Affco’s high-throughput model, making it difficult to reach consensus.

Meanwhile, farmers, who play meat companies off to get the best farmgate returns, were advised not to commit stock through long-term agreements to support meat companies who were reducing capacity, on concern it would reduce competition, the people said.

The cooperatives face tension from their farmer shareholders wanting higher farm gate prices for the stock they supply versus the longer term gains they could obtain from retaining earnings in the business to reinvest in marketing and product development, to build higher returns for the future.

New Zealand meat companies haven’t significantly reduced their processing capacity even as sheep numbers fall. New Zealand sheep numbers fell below 30 million this year, from a peak of about 70 million in 1982, according to Beef + Lamb New Zealand’s Economic Service.

Meat is the nation’s second-largest commodity export, worth about $5.6 billion a year, behind dairy products at $15.8 billion, according to government figures.

Processors are competing for the diminishing supply, as increased throughput of livestock makes their plants more efficient. That means in times of scarce supply, farmers are paid a higher price for their livestock which bears little relationship to what the final consumer is prepared to pay as processors avoid having their plants sit idle.

Dunedin-based Silver Fern Farms, which had $2 billion of annual sales last year, will probably provide an update on a PriceWaterhouseCoopers strategic review of the business in its annual report published towards the end of this calendar year. The review, which focused on future options following the stalled industry aggregation discussions, was presented to the meat company’s board in February.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Scoop Business: Alex Swney Pleads Guilty To $2.5M Fraud Charge

Alex Swney, former chief executive of the Auckland city centre business association Heart of the City, has pleaded guilty to dishonestly using documents to obtain $2.5 million. More>>

ALSO:

Petrol Burns Prices: Second Consecutive Quarterly Fall For CPI

The consumers price index (CPI) fell 0.3 percent in the March 2015 quarter, following a 0.2 percent fall in the December 2014 quarter, Statistics New Zealand said today. The last time the CPI showed two consecutive quarterly falls was in the December 1998 and March 1999 quarters. More>>

ALSO:

Scoop Business: NZ Broadcasters Launch Battle Against Global Mode ISPs

New Zealand broadcasters have confirmed they’ve launched legal proceedings against internet service providers who give customers’ access to “global mode”, which allows customers access to offshore online content, claiming it breaches the local content providers’ copyright. More>>

ALSO:

Sanford: Closure Of Christchurch Mussel Processing Plant Confirmed

The decision comes after a period of consultation with the 232 staff employed at the Riccarton site, who were told on 9 April that Sanford was considering the future of mussel processing in Christchurch. Recent weather patterns had impacted on natural spat (offspring) supply... More>>

ALSO:

Price Of Cheese: Dairy Product Prices Fall To The Lowest This Year

Dairy product prices fell in the latest GlobalDairyTrade auction, hitting the lowest level in the 2015 auctions so far, as prices for milk powder and butter slid amid concern about the outlook for commodities. More>>

ALSO:

Houston, We Have An Air Route: Air New Zealand To Fly Direct To The Heart Of Texas

Air New Zealand will fly its completely refitted Boeing 777-200 aircraft between Auckland and Houston up to five times a week opening up the state of Texas as well as popular nearby tourist states such as Louisiana and Florida. More>>

ALSO:

Scoop Business: Reserve Bank’s Spencer Calls On Govt To Rethink Housing Tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news